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Arbitration Clauses & Law

Arbitration is an out-of-court proceeding in which a neutral third party called an arbitrator hears evidence and then makes a binding decision. Arbitration is the most commonly used method of alternative dispute resolution (ADR), and you’ll find an arbitration clause in the fine print of all kinds of contracts these days. Recently, arbitration has been under fire because of how it circumvents the civil justice system.

Supporters of the process believe that such clauses help to mediate and resolve issues better than litigation as well as cost much less than the “frivolous” amount of lawsuits that are produced in America. However, unlike a court ruling, a binding ruling can’t be appealed. It can be set aside only if a party can prove that the arbitrator was biased or that the arbitrator’s decision violated public policy. There is no automatic right to discovery, the process by which the parties have to disclose information about their cases to the other party—unless included in the clause as a requirement. The costs of arbitration can be significant in some cases and may even exceed the costs of litigation [1].

There are also two forms of arbitration clauses that effect enforcement of the contract. Arbitration can be binding whereas the participants must follow the arbitrator’s decision and courts will enforce it. It can also be nonbinding whereas either party can reject the arbitrator’s decision and take the dispute to court. The binding arbitration is more common.

New York Times Articles

In a recent series of New York Times articles, arbitration has come under fire for its ability to override the current system as well as its religious undertones. Many businesses require employees to sign contracts with such religious or binding arbitration clauses before beginning their work or signing up for a program so that they cannot be sued within the civil justice system. The privatization of the justice system has much of the public in awe because they weren’t aware of what they were signing up for. By removing the ability to sue, the possibility for businesses to overstep their boundaries without true regulation may cause the next generation of employees to miss out on fair business practices.

When it comes to federal class actions, arbitration clauses come into play most often in employment cases. Most of these involve wage gap disputes, but companies are also pursuing arbitration in discrimination claims.

As such, arbitration clauses are increasingly unavoidable, appearing in contracts for everything from banks to nursing homes and substance abuse programs. By agreeing to these clauses, millions of consumers are giving their right to go to court individually or by class action [2]. In 2014 alone, judges upheld class-action bans in 134 out of 164 cases.

  • Banks: A particularly harsh set of lawsuits starting in 2009 revealed an accounting device that more than a dozen banks employed on debit card transactions. Customers accused the banks of deducting larger payments like monthly rent before taking out the smaller charges like money spent on gum because changing the order of transactions, the lawsuit said, allowed the banks to increase the number of times they could charge overdraft fees. Forced into court, the banks handed out $1 billion in settlement. Due to the 2008 financial crisis, many of the banks receive most of their revenue from fees. Seven of these banks have added arbitration clauses to save their assets [3].
  • Nursing Homes: In May of 2014, a woman with Alzheimer’s was sexually assaulted twice in two days by other residents at the Bella Vista Health Center, a nursing home in Lemon Grove, California. According to the investigation by the state’s department of health, they found that the nursing home “failed to protect” the woman. After unsuccessfully fighting to have the arbitration clause in their agreement voided, the woman’s family settled with Bella Vista. Between 2010 and 2014, more than 100 cases against nursing homes for wrongful death, medical malpractice and elder abuse were pushed into arbitration [4].
  • Substance Abuse Programs: Nicklaus Ellison was offered a Christian–run program called Teen Challenge that was supposed to cure his drug and alcohol problem as opposed to jail time for his DUI arrest and was instead “de-gayed”. A few months into the program, after some disciplinary measures were taking for an undisclosed event at the program, Ellison was transferred to another facility to continue his treatment. About a month later, his mother got a call while she was out explaining circumstances in which Mr. Ellison was intoxicated and was being taken to the hospital. When she called the hospital, she was told that Ellison had never been “seen or admitted” there. Somehow, he ended up at CVS in downtown Jacksonville where he met a woman who drove him to her apartment and they both stayed up drinking. At 4pm the woman told investigators that when she check on Ellison, he was unresponsive. An autopsy revealed cough medicine and methadone in his system. Ms. Spivey said she was convinced that only a lawsuit could force Teen Challenge to explain what had happened. But the contract that Mr. Ellison signed when he enrolled in the program stated that any dispute had to go to Christian conciliation. Last year, Ms. Spivey decided to settle with Teen Challenge [5].

By inserting individual arbitration clauses into a soaring number of consumer and employment contracts, companies have devised a way to circumvent the courts and bar people from joining together in class-action lawsuits, realistically the only tool citizens have to fight illegal or deceitful business practices. For religious clauses, Courts are upholding the clauses based on contract principles and a reluctance to interfere with First Amendment rights of religious groups, the Times story reports. Plaintiffs, on the other hand, contend their First Amendment rights are violated because they are being forced to participate in religious activity [6].

Dolman Law Group

When it comes to contracts with work, insurance companies, nursing homes etc, the lawyers at Dolman Law Group know what it means to be fairy covered. With the addition of arbitration clauses, binding or not, consumers need to be aware of what rights they may be waiving when agreeing to said contract. It’s a new way for businesses and companies to try and go around the court system when consumers file complaints. Through settlements handled outside of the court, issues can be swept under the rug or paid off. You should know where you stand with the places you’ve signed agreements for. Usually, most have between 30 to 45 days to forgo the arbitration clause of the contract so that there is nothing holding consumers back. If you would like an attorney to look over any issues associated with an agreement or evaluate a claim you have against a contract, please contact the experienced attorneys at Dolman Law Group. Call (727) 451-6900 today.

Dolman Law Group
800 North Belcher Road
Clearwater, Florida 33765
727-451-6900

https://www.dolmanlaw.com/legal-services/

References:

[1] http://www.nolo.com/legal-encyclopedia/arbitration-clauses-contracts-32644.html
[2] http://www.nytimes.com/interactive/2015/10/30/business/dealbook/arbitration-trends.html
[3] http://www.nytimes.com/2015/11/01/business/dealbook/arbitration-everywhere-stacking-the-deck-of-justice.html
[4] http://www.nytimes.com/2015/11/02/business/dealbook/in-arbitration-a-privatization-of-the-justice-system.html
[5] http://www.nytimes.com/2015/11/03/business/dealbook/in-religious-arbitration-scripture-is-the-rule-of-law.html
[6] http://www.abajournal.com/news/article/buying_a_bamboo_floor_this_company_requires_religious_arbitration_courts_up